Education, growth and skill formation in Tanzania and selected East African countries

This study provides an analysis of the effect of government expenditure on education and other social and economic variables in Tanzania alongside other East African countries of Kenya, Uganda and Mozambique. The other variables include life expectancy, population growth rate, gross fixed capital formation, inflation external debt, terms of trade, debt forgiveness through Heavily Indebted Poor countries (HIPC) program and civil conflict. In addition, the paper also analyses the supply for skilled labor in Tanzania economy using the government sector, General Tyre (EA) Company, Tanzania Breweries Company and Tanzania Cigarette Company as samples. The period of study is 27 years between 1980 and 2006.;Model 1 estimates the effect of government expenditure in education on per capita income growth in a cross-country pooled and panel data analysis with cross-sectional weights on educational expenditure. The study found out that there is a positive correlation between expenditure on education and per capita income in all countries except Tanzania. One of the reasons for a negative correlation in Tanzania was a decline in levels of government expenditure in education during the last decade of the period of study. All other variables, except life expectancy, gross fixed capital formation and debt forgiveness, had their coefficients negatively related with per capita income.;Model 2 estimates the trend for the skill formation in Tanzania over the period of study. A cross-section analysis showed that there was an increment of skill formation. However, due to technological advancement and need for an increase in productivity, the level of skilled labor employment declined during the period of study.;The study recommended policy changes to enhance expenditure on educational sector by the government in partnership with the private sector, while controlling for quality of education and targeting requisite skill development. The study also recommends that investment demand in the productive sectors that provides impetus for skill formation and enhancement of productive capacity that contributes to growth and alleviation of poverty should go in tandem with the developments in the educational sector.